The harmless observations of Ugandan, Paul Busharizi. Is it me or are we missing something here?

Thursday, September 13, 2012

UGANDA'S KARUMA DAM: ANATOMY OF A DEAL GOING BAD

Last week the $2.2b Karuma dam tender process was suspended
by the government’s procurement authority and a court injunction slapped on the
deal, throwing the crucial 600MW project into jeopardy.

A, trail of intrigue, outright disregard for procedure and
insubordination against the President has brought to a standstill the deal, which
should have been consummated by March and seen construction start by now.

This is the single largest investment in Uganda's history.

In the late 1960s a dam was proposed at the Murchison Falls,
further downstream from Karuma, a plan that was scuttled by concerns about
environmental damage and not followed through in during the Idi Amin era.

In 1988 government tried to revive the project but again
came up against environmental concerns and shelved it yet again.

With the power deficit becoming even more urgent in the in
the late 1990s, the alternate site of Karuma falls was mooted.

However its development was again frustrated by the World
Bank conditionality that only one dam could be developed at a time. At that
time government had committed to developing Bujagali dam.

The Bank argued that developing the two sites simultaneously
would put too much of a financial burden on the country and besides there
wasn’t enough demand locally to support the dams.

Karuma took a back seat to Bujagalai and eventually failed to
take off because of the global financial crisis and its attendant credit
crunch.

Three years ago government decided to resurrect the project
using internally generated resources. This was prompted by the recognition that
even when the entire 250 MW at Bujagali came on line it would only a matter of
months before rising demand snapped it up and the country returns to “loadsheding”.

Fast forward to last year when government invited bids for
the project and received just under 40 bids, a number that was trimmed to 28
before a final five companies were prequalified.

THE CIRCUS BEGINS

A six month time table from issue of the bid document in
September 2012 to the taking over of the site by the winning bidder in March
2012, was announced to all the bidders.

The energy ministry closed the bidding at the end of
November to pave the way for the evaluation of the technical proposals, which
determines whether the bidders have the capacity in terms of experience and
technical knowhow, to carry out the project.

It’s at this point that things started going awry.

The next stage was for the energy ministry to notify all
bidders of the results of the technical report and announce when the financial
bids would be opened, which would determine who the winning bidder would be,
often times the least cost bidder but government is not bound to choose the
cheapest bid.

However there was no word to the bidders from the energy
ministry months into the New Year and all enquiries were rebuffed by a wall of
indifference.

It did not help that disturbing rumours made it onto the
grapevine that indicated that the delays were to facilitate a scheme to ram
through a company favoured by ministry officials.

Meanwhile the bidders waited for any information about the
tender as the day the contractor was supposed to take over the sight according
to original timetable, March 28th came and went.

A whistleblower within the energy ministry then unleashed a
dossier that revealed that the alleged favoured bidder China International
Water & Electric (CWE) had misrepresented its competencies – grounds for
immediate disqualification.

The dossier got to the president prompting him to write to
energy minister Irene Muloni in July, pointing out the inability of CWE to
technically carry out the project.

“These facts should have been clear in the documents but
apparently they were not and it took the whistle blowers to discover this and
inform us,” Museveni wrote.

While disputing claims that CWE had built China’s 22,500 MW
Three Gorges Dam and pointing out that the Meroe Dam in Sudan in which they
claim to have played a part in building, has serious design problems Museveni
wrote,

“Therefore in my last letter I directed you to ensure that
the more credible Chinese companies, like the one that built the Three Gorges
Dam agree to guarantee the quality of the Karuma dam.

If that is not done as soon as possible, I will be forced to
oppose the whole poorly done effort,” Museveni said.

It seems the ministry officials did not advise
the president that a guarantee of the nature he proposed would be flouting
procurement procedure.

But it got worse.

In reaction to the President ministry officials went ahead
to facilitate the much needed guarantee from Three Gorges Corporation.

In a letter to Daniel Wang the general manger of CWE on 17th
August, Attorney GeneralPeter Nyombi
made reference to a meeting between himself, the president, Muloni, state minister Simon D’ujanga, permanent
secretary Kabagame Kalisa and officials of CWE and Three Gorges Corporation in
which it was agreed that the guarantee to the project would be supplied by
China Three Gorges Corporation.

“The purpose of writing this letter is to request for
the following;

The legal instruments of both China Three Gorges corporation
and china International Water & electric corporation related to the registration
of the two companies, especially those showing the relationship between the two
companies; a description of the workto
be executed under the contract; a copy of technicaldesigns of the dam to be constructed and the
terms and conditions that should be included in the contract,” Nyombi wrote.

A lawyer familiar with government procurement procedures
said this was highly irregular since the tender process was still ongoing but
clearly the government was already negotiating with one bidder.

“The process is ongoing how do you go to the president with
one bidder … you are hijacking the process, this a fraudulent act, it is
unethical, unlawful and irregular” the legal expert said.

“And the technical officers who were in that meeting they
should take responsibility for drawing the president into such a scheme.”

Given that the financial bids were not yet opened what would
happen if they were opened to find the bid was ten times higher than they want
and yet government has already gone into agreement with the party, the lawyer
asked.

PPDA COMES IN, COURT SLAPS INJUNCTION

To the other bidders, that the process was being rigged in
CWE’s favour was beyond doubt at this point.

Salini Spa, a consortium led by French firm Vinci
Construction and Chinese firm SinoHydro applied to the Public Procurement &
Disposal of Public Assets Authority (PPDA) to suspend the process pending an
administrative review.